Free trade agreements in Congress

I needed to do a whole lot of work today but I’ve been watching too much C-SPAN. No, seriously.

Today Congress is debating three major NAFTA-style free trade agreements, with South Korea, Panama and Colombia. I didn’t really mean to watch the debates (it should come as no surprise that I think all three FTAs are terrible policy; for some reasons why, here are a few good things to read), but I started and I can’t stop. I’ve been live-blogging of sorts on my Facebook feed – sorry Facebook friends, and I understand if you’ve un-friended me because of this unexpected outburst. Here are some “highlights”:

The C-SPAN ticker summarizes the Korea FTA as follows: “Reduces tariffs on U.S. auto exports,” and something about duty-free access (sorry, I didn’t write it down in time). I found this pretty annoying: the FTAs are about much more than just tariff reductions. They’re also about foreign investor protections, reduction of non-tariff barriers, financial deregulation, intellectual property, etc., etc. Those things are really important and it was disappointing to see the debate over all three FTAs dominated by talk about export numbers and jobs.

Virtually every member of Congress who has spoken in favor of the FTAs has described them as job-creating agreements, which simply isn’t true based on the history of NAFTA-style FTAs. A huge number of members have mentioned the expected increases in exports that will result from passage of the FTAs. This may be true (although it actually may not be). But talking about export changes without talking about import changes is like talking about revenues without talking about expenses. It’s net exports that matter, and the U.S. has a net trade deficit with countries with which we have FTAs. The fact that this kind of basic mistake is being made by members of Congress is not an encouraging sign.

On the other side, the arguments against the Korea FTA in particular, denouncing Korean and Chinese currency manipulation, kind of rub me the wrong way. First, there’s a certain implicit xenophobia in the strident anti-China rhetoric that makes me uncomfortable. Second, I think monetary policy is a legitimate macroeconomic tool, and I’m not really down with even further constraining the policy tools that developing countries have at their disposal. That said, monetary policy is still something about which I’m pretty hazy, so I welcome comments and clarifications.

To close on a broader note, I think a comment by Rep. Joseph Crowley (D-N.Y.) about the Korea FTA was pretty illustrative: “The Bush administration was willing to submit an FTA that heavily favored Korea; the Obama administration has fixed that.” (paraphrased) I think this analysis is fatally flawed. It’s hard to believe that the Bush administration would really have negotiated and signed a trade agreement that “heavily favored Korea” at the expense of the United States. That just isn’t the case; the whole frame is wrong. The question isn’t whether the FTA is good for Korea or the United States as aggregate entities. The question is, who in those countries is the FTA good for? The answer to that question indicates why both Bush and Obama support the agreement – and also supplies an answer to the question, “What are all those people on Wall Street so mad about?” As Rep. Mike Michaud (D-Maine) put it:

You only have to look at the President’s economic advisors… Since elected, the President has surrounded himself with advisors from Wall Street banks, with CEOs from companies that don’t pay taxes, and with staffers who pushed NAFTA-style trade agreements under Clinton. Those advisors don’t bring fresh perspectives to the White House. They bring more of the same corporate priorities that have caused the current and previous White House administrations to turn a blind eye while the big banks played roulette with our pensions and mortgages – and then asked for a taxpayer bailout.

[…] This FTA won’t do anything to reduce our 9% unemployment. But, the big companies and the big banks want it! So, President Obama is going to give in to the Washington elites once again.

This helps answer the question of how U.S. trade policy relates to development. If the FTAs we negotiate benefit business elites in the U.S. and abroad, the implications for equitable, inclusive development are pretty clear. That’s why a Korean farmer committed suicide in protest of the 2003 WTO ministerial in Cancún; it’s why Colombian human rights activists have spoken out in opposition to the Colombia FTA, despite the dangers inherent in doing so. For marginalized people in certain developing countries, U.S. trade policy is literally a matter of life and death.